American Life: Less Ordinary

Fortune Magazine reports:

Wall Street strategist explains today’s political rage with a poverty line that should be $140,000 and the ‘Valley of Death’ trapping people below it.

Experts suggest that Mamdani’s victory in New York City was largely influenced by concerns over ‘affordability.’

While federal data indicates stable unemployment, inflation, and GDP figures, daily life for many Americans is becoming increasingly unaffordable. On the surface, this is because the cost of an ‘ordinary’ lifestyle has surged. In reality, however, the ‘ordinary’ lifestyle now confines millions in a financial trap.

Consequently, Mamdani’s promises of rent reductions, free transportation, and childcare appealed to voters.

Official statistics fail to reveal the full picture. Despite people being employed and having housing, sustaining an ‘ordinary’ lifestyle now demands far greater expenses. Viewed from a grounded, everyday perspective, millions are caught in what Michael Green dubs the ‘Valley of Death.’

He points out that the poverty threshold was established in 1963, originally set at three times the minimum food budget.

Green explains:

‘The formula was developed by Mollie Orshansky, an economist at the Social Security Administration. In 1963, she observed that families spent roughly one-third of their income on groceries. Since pricing data was hard to come by for many items, e.g. housing, if you could calculate a minimum adequate food budget at the grocery store, you could multiply by three and establish a poverty line.’

At that time, this method made sense: if families devoted no more than a third of their income to food, they could allocate the rest toward other needs.

However, since 1963, everyday costs have grown considerably. Housing prices have skyrocketed—a typical home now costs $420,000, yet most families qualify for homes under $300,000.

Health insurance was minimal back then, with Blue Cross/Blue Shield premiums at about $10 per month; today, premiums on the ACA marketplace average $600 monthly.

Childcare, once handled by stay-at-home mothers, is now essential. Tuition costs have also dramatically increased—from working summer jobs to pay for the University of Maryland tuition in the ‘60s, to the current $11,000 for in-state and $40,000 for out-of-state students.

In the past, retirees often owned their homes outright and had paid off cars; combined with modest pensions and Social Security, retirement was manageable.

Today, food accounts for only 5% to 7% of family expenses, with housing consuming about 40% and healthcare 20%. For families with young children, childcare can make up 20% or more of the budget.

These transformations redefine the poverty line. Green notes:

If you measured income inadequacy today the way Orshansky measured it in 1963, the threshold for a family of four wouldn’t be $31,200. It would be somewhere between $130,000 and $150,000.

He breaks down the average ‘ordinary’ family expenses as follows:

Childcare: $32,773
Housing: $23,267
Food: $14,717
Transportation: $14,828
Healthcare: $10,567
Other essentials: $21,857
Required net income: $118,009
Adding federal, state, and FICA taxes of about $18,500 brings the gross income needed to $136,500.

Prices have surged for sectors shielded from import competition, including childcare, education, healthcare, and housing.

Moreover, remaining connected is essential today—back in 1955, ‘participation’ in everyday life meant a $5 monthly landline phone expense. Today, broadband and smartphones cost approximately $200 monthly, according to Green.

Costs vary by region: living expenses in cities like San Francisco or New York are far higher than in places like Arkansas or Mississippi.

Green highlights more than just new expenses; he describes an emerging hardship where, despite maintaining many middle-class amenities, individuals become perpetually indebted to the credit system.

As children grow and attend college, few families save enough to cover tuition, necessitating loans.

The result is extended financial bondage from student debt to car loans, housing payments, and other basic needs of an ‘ordinary’ existence. Many will spend their adult years struggling through the Valley of Death, possibly never escaping it.

More to come…

Editor’s note: Read more from Bill and team at BonnerPrivateResearch.com.